SEC charges for BD impersonation and client fund misappropriation
The Securities and Exchange Commission (SEC) has charged three individuals for selling interests in shares of pre-IPO companies on behalf of StraightPath Venture Partners LLC, despite not being registered broker-dealers, and for misleading investors about the fees associated with those investments.
The Commission previously charged StraightPath Venture Partners, StraightPath Management LLC, and its four principals in May 2022 in connection with a $410 million fraud.
The SEC alleges that, between November 2017 and November 2021, the defendants actively solicited investments for interests in funds that were set up as series LLCs, each of which purported to acquire shares of a single pre-IPO company. The defendants allegedly provided investors with marketing materials, advised investors on the supposed merits of the investments, and received transaction-based compensation, all hallmarks of a broker, despite not being registered as brokers. As alleged in the complaint, the defendants collectively solicited at least $13 million in investments from at least 115 investors, and, even though each of the defendants received upfront commissions of approximately 10 percent on investments they successfully solicited, the defendants falsely told investors that there were no upfront fees associated with their investments. According to the complaint, the defendants collectively received at least approximately $3.7 million in transaction-based compensation.
The regulator has also charged Darryl Matthew Cohen, a former investment adviser at a large financial institution, with misappropriating more than $1 million from three current and former NBA players over a period of two and a half years.
According to the SEC’s complaint, from October 2017 through April 2020, Cohen used client funds, without their understanding or authorization, for personal expenditures including to support his son’s amateur basketball program, for a home gym, and to pay back another client whose funds Cohen had misappropriated. Cohen also allegedly sold life insurance settlements to the clients for kickbacks to fund his home improvements.
SEC offers crypto investor alert
The SEC has published an alert for investors considering crypto asset securities.
The alert highlights four concerns:
- Entities offering crypto asset investments or services may not be complying with applicable law, including federal securities laws.
- Investments in crypto asset securities can be exceptionally risky and are often volatile.
- Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams, often leading to devastating losses.
- Having an investing plan, as well as understanding risk tolerance and time horizon, can be critical to investing success.
Senior appointments at FCA
The Financial Conduct Authority (FCA) has announced the appointment of Therese Chambers and Steve Smart as joint Executive Directors of Enforcement and Market Oversight, following the departure of Mark Steward. The expansion of the FCA’s enforcement and market oversight leadership team highlights the importance of enforcement work in delivering the FCA’s three-year strategy, reducing financial crime, ensuring consumer outcomes meet higher standards, and ensuring effective market oversight to support financial stability.
Chambers, who has worked at the FCA for more than 20 years, brings extensive regulatory, supervisory, and legal experience to the role, while Smart brings criminal enforcement, investigatory, intelligence, and security experience, having worked in the National Crime Agency and the private sector. The new appointments reflect the FCA’s ongoing transformation to become a more assertive, adaptive, and innovative regulator.
Strengthening supervision through collaborative partnerships: MAS speech
Tan Keng Heng, Executive Director, Monetary Authority of Singapore (MAS), has spoken about the importance of a shared agenda between the asset management industry, service providers and the regulator itself in helping to foster a thriving and well-regarded asset management sector, noting that the industry has the collective responsibility to uphold good practices and promote the right behaviours that engender value and trust in the investment ecosystem.
Mr Tan Keng Heng also discussed MAS’s efforts to clarify regulatory expectations and share best practices with the industry, including the annual industry engagement townhalls and information papers on specific areas of focus. He also discussed the Investment Management Association of Singapore’s (IMAS) initiatives in complementing MAS’s efforts through thematic industry guidelines and revisions to the Code of Ethics and Standards of Professional Conduct. He concluded by noting that MAS will continue to engage the industry proactively to provide more regulatory clarity and supervisory guidance on sound practices, including observations on the industry’s liquidity risk management practices and insights from upcoming inspections on asset valuation and investment due diligence.
A selected summary of key developments for regulated financial institutions
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